Effect of Divorce on a Small Business
Illinois divorces can be complicated, especially when they involve numerous assets or a family business. The presumption in Illinois is that assets or wealth gained during the marriage will be considered part of martial assets, which are subject to equitable division during a divorce. Equitable division is a fluid term, which can give rise to lengthy and expensive litigation. For example, if a divorce involves a small business (or a big one for that matter), the divorce court has to determine whether it is part of the martial estate.
This determination can be tricky, especially in cases where the business predates the marriage. Fortunately, with proper planning, parties may avoid many of these issues. For example, a small business owner who is contemplating marriage, may contact an Illinois family law attorney to determine whether a prenuptial agreement would be helpful. Prenuptial agreements are a valuable tool, but they must meet the Illinois requirements before they are valid. At minimum, the parties must have separate attorneys representing them during the drafting and execution of the prenuptial agreement. If only one side has an attorney, there will be a presumption of unfair advantage in favor of the party who had an attorney.
On the other hand, if the business is the product of the marriage, i.e., it came in existence after the marriage, the parties may contact their attorney to determine what type of business entity would best serve their needs. For example, a corporation in which the husband and wife have equal shares would remove any doubts as to the distribution. Moreover, the parties may agree to a specific buy-out process in case one party wants to get out of the business. This can be important to ensuring the continuity of the business during a divorce process that can be emotionally charged and prone to vindictive behavior.
Independently of what the case may be, proper planning prior to divorce can ensure the best outcome. A prudent small business owner would make sure to contact an Illinois family law attorney to explore their options.